Customers line up for the release of the iPhone in 2007.
Tech stocks are those of publicly traded companies whose business involves the manufacture of electronic components and devices. Ranging from computer chips to cell phones, tech stocks tend to get a lot of attention because they capture the imagination of popular culture and deliver innovative new machines that revolutionize modern life. After the dot-com collapse in 2000, tech stocks developed a bad reputation, but the huge proliferation of the Internet, e-commerce and handheld PDAs has delivered much of the promise of that period. Because tech stocks seem to create a bridge to the more efficient economy of the future, investing in tech stocks is an attractive proposition to many.
Instructions
1. Fund a brokerage account. It's fairly simple to create a brokerage fund through any one of the dozens of online retail brokers. Most can be funded directly by check or electronic transfer. Once a brokerage account is funded, it can be used to invest in a variety of stocks, including tech.
2. Buy a mutual fund. The easiest, most hands-off way to invest in tech stocks is to buy a technology mutual fund. Morningstar (see Additional Resources below) has a popular fund screener that sorts by performance, composition, manager experience and investment style. Most mutual funds are actively managed, meaning the fund manager makes individual investment decisions for you. Examples of technology mutual funds are BlackRock Science & Technology, Goldman Sachs Tollkeeper, HighMark ArcaTech, Ivy Science & Technology and Wells Fargo Advantage.
3. Buy an exchange traded fund, or ETF. A somewhat more hands-on approach to investing in tech, an ETF reflects the tech sector as a whole, or subsectors within the tech industry (such as semiconductor production or Internet infrastructure). This approach reduces company-specific risks and rewards, and is a good way to gain diversified exposure to tech as a whole. ETFs trade like stocks, and some even have options chains and dividends. Common tech ETFs include the Technology Select Sector SPDR (XLK), the Goldman Sachs Semiconductor Index Fund (IGW), and the iShares Dow Jones U.S. Technology Fund (IYW). See Additional Resources below for more on tech ETFs.
4. Choose individual stocks. By far the most complex and risky, but potentially rewarding, way to invest in tech is to do your own research and buy the stock of individual companies. Whether it's shares of blue chip names like Intel or IBM, or more speculative names such as Sirius XM, the purchase of individual stocks requires the greatest amount of attention and effort on the part of an investor. If done carefully and correctly, it also creates the greatest profit potential, especially over the intermediate to long term.
